100 test bank for intermediate accounting 6th edition

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100 Test Bank for Intermediate Accounting 6th Edition

True - False Questions

Comprehensive income is another term for net income

The FASB's framework for measuring fair value doesn't change the situations

in which fair value is used under current GAAP

Accrual accounting attempts to measure revenues and expenses that

occurred during accounting periods so they equal net operating cash flow

1 True

2 False

Revenues are inflows or other enhancements of assets or settlements of liabilities from activities that constitute the entity's ongoing operations

1 True

2 False

The primary responsibility for properly applying GAAP when communicating with investors and creditors through financial statements lies with a firm's auditors

1 True

2 False

A rules-based approach to standard setting stresses professional judgment

as opposed to following a list of rules

Determining fair value by calculating the present value of future cash flows is

a level 1 type of input

1 True

2 False

Conservatism is a desired qualitative characteristic of accounting information

1 True

2 False

Multiple Choice Questions - Page 1

The conceptual framework's recognition and measurement concepts

recognize which of the following as a principle, rather than an assumption?

The most political issue in the FASB's most recent deliberations and

amendments to GAAP on business combinations was:

1 A The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the purchase method of accounting for the combination.

2 B The negative effects on subsequent earnings of amortizing goodwill if firms were required to use the pooling method of accounting for the combination.

3 C The unrealistic balance sheet assets that would be created if firms were required to use the purchase method of accounting for the combination.

4 D The unrealistic balance sheet assets that would be created if firms were required to use the pooling method of accounting for the combination.

When a registrant company submits its annual filing to the SEC, it uses:

The most recent example of the political process at work in standard setting is the heated debate that occurred on the issue of:

1 A Pension plan accounting.

2 B Accounting for posteretirement benefits other than pensions.

3 C Accounting for business combinations.

4 D Accounting for stock-based compensation.

The conceptual framework's qualitative characteristic of relevance includes:

1 A Predictive value.

2 B Verifiability.

3 C Completeness.

4 D Neutrality.

Which of the following is not true about net operating cash flow?

1 A It is the difference between cash receipts and cash disbursements from providing goods and services.

2 B It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows.

3 C Over short periods of time, it may not be indicative of long-run cash-generating ability.

4 D It is easy to understand and all information required to measure it is factual.

The FASB's conceptual framework's qualitative characteristics of accounting information include:

4 D Going concern assumption.

Pronouncements issued by the Committee on Accounting Procedures:

1 A Dealt with specific accounting and reporting problems.

2 B Were based on exposure drafts and public comment letters.

3 C Originated from congressional studies and SEC directives.

4 D Were the outcome of research studies and a theoretical framework.

The FASB's conceptual framework's qualitative characteristics of accounting information include:

1 A Full disclosure.

2 B Relevance.

3 C Going concern.

4 D Historical cost.

Which of the following groups is not among financial intermediaries?

1 A Mutual fund managers

2 B Financial analysts

3 C CPAs

4 D Credit rating organizations

The conceptual framework's recognition and measurement concepts

recognize which of the following as an assumption, rather than a principle?

1 A Going concern.

2 B Historical cost.

3 C Full disclosure.

4 D Realization.

GAAP is an abbreviation for:

1 A Generally authorized accounting procedures.

2 B Generally applied accounting procedures.

3 C Generally accepted auditing practices.

4 D Generally accepted accounting principles.

In a recent annual report, Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of:

1 A Conservatism

2 B The matching principle

3 C Realization principle

4 D Economic entity

The International Accounting Standards Board:

1 A Was the predecessor to the IASC.

2 B Can overrule the FASB when their policies disagree.

3 C Promotes the use of high-quality, understandable global accounting standards.

4 D Has its headquarters in Geneva.

Phase A of the new conceptual framework focuses on:

1 A Objective and qualitative characteristics.

2 B Presentation and disclosure.

3 C Recognition and measurement.

4 D Elements of financial statements.

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley)? The Act:

1 A Changed the entity responsible for setting auditing standards.

2 B Increased corporate executive responsibility for financial statements.

3 C Limited nonaudit services that can be performed by auditors for audit clients.

4 D Changed the entity responsible for setting accounting standards.

The full disclosure principle requires a balance between:

1 A Comparability and consistency.

2 B Relevance and cost effectiveness.

3 C Reliability and neutrality.

4 D Timeliness and predictive value.

Which of the following was the first private sector entity that set accounting standards in the United States?

1 A Accounting Principles Board

2 B Committee on Accounting Procedure

3 C Financial Accounting Standards Board

4 D AICPA

Which of the following does not apply to secondary markets?

1 A Transactions are important to the efficient allocation of resources in our economy.

2 B New resources are provided when shares of stock are sold by the corporation to the initial owners.

3 C Transactions help to establish market prices for additional shares that may be issued in the future.

4 D Many investors might be unwilling to provide resources to corporations if there is no available mechanism for the future sale of their stocks and bonds to others.

The primary historical reason for the FASB reversing its positions when

political pressures occur is:

1 A The cost of gathering data was prohibitive.

2 B The difficulties in measurement were too great.

3 C They have no authority in such situations.

4 D The SEC did not support the FASB position.

The FASB's standard-setting process includes, in the correct order:

1 A Exposure draft, research, discussion paper, Accounting Standards Update.

2 B Research, exposure draft, discussion paper, Accounting Standards Update.

3 C Research, discussion paper, exposure draft, Accounting Standards Update.

4 D Discussion paper, research, exposure draft, Accounting Standards Update.

CPAs are licensed by:

1 A The AICPA.

A firm's comprehensive income always:

1 A Is the same as its net income.

2 B Is greater than its net income.

3 C Is less than its net income.

4 D Could be greater than or less than net income.

Accounting standard setting has been characterized as:

1 A A political process.

2 B Using the scientific method.

3 C Pure deductive reasoning.

4 D Pure inductive reasoning.

Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

1 A Corporate executive accountability.

2 B Auditor rotation.

3 C Retention of workpapers.

4 D All of the above are provisions of the Act.

External decision makers would not look primarily to financial accounting information to assist them in making decisions on:

1 A Granting credit.

2 B Capital budgeting.

3 C Selecting stocks.

4 D Mergers and acquisitions.

The recognition of which of the following expenses exemplifies the

application of the matching principle?

1 A President's salary.

2 B Research and development.

3 C Cost of goods sold.

4 D Advertising.

The SEC issues accounting standards in the form of:

1 A Accounting Research Bulletins.

2 B Financial Reporting Releases.

3 C Financial Accounting Standards.

4 D Financial Technical Bulletins.

69 Free Test Bank for Intermediate Accounting 6th

Edition by Spiceland Multiple Choice Questions - Page 2

To meet the needs of full disclosure, companies use supplemental

information, including:

1 A Parenthetical comments or modifying comments placed on the face of the financial statements.

2 B Disclosure notes conveying additional insights about company operations,

accounting principles, contractual agreements, and pending litigation.

3 C Supplemental financial statements that report more detailed information than is shown in the primary financial statements.

4 D All of the above are correct.

Independent auditors express an opinion on the:

1 A Fairness of financial statements.

2 B Accuracy of financial statements.

3 C Soundness of a company's future.

4 D Quality of a company's management.

Land was acquired in 2011 for a future building site at a cost of $40,000 The assessed valuation for tax purposes is $27,000, a qualified appraiser placed its value at $48,000, and a recent firm offer for the land was for a cash

payment of $46,000 The land should be reported in the financial statements at:

Net income equals:

1 A Assets minus liabilities.

2 B Revenues minus cost of goods sold.

3 C Revenues minus expenses.

4 D Cash receipts minus cash payments.

If a company has gone bankrupt, its financial statements likely violate:

1 A The matching principle.

2 B The realization principle.

3 C The stable monetary unit assumption.

4 D The going concern assumption.

The main issue in the debate over accounting for employee stock options was:

1 A Which employees should receive options.

2 B The amount of compensation expense that a company should recognize.

3 C How many options should be granted to key executives.

4 D The tax consequences of employee stock options.

An important argument in support of historical cost information is:

3 C Providing accountability.

4 D Increasing future profits.

Enhancing qualitative characteristics of accounting information include each

of the following except:

1 A Inflows from selling a product or service to a customer.

2 B Increases in equity resulting from transfers of assets to the company from owners.

3 C Increases in equity from peripheral transactions of an entity.

4 D None of the above.

The possibility that the capital markets' focus on periodic profits may tempt a company's management to bend or even break accounting rules to inflate reported net income is an example of:

1 A An ethical dilemma.

2 B An accounting theory issue.

3 C A technical accounting issue.

4 D None of the above is correct.

Which of the following is not an identified valuation technique in GAAP

regarding fair value measurement?

independent accountants did not protest when, contrary to GAAP, the

company recorded bad debt expense only when specific accounts were

determined to be uncollectible, rather than use an allowance for uncollectible accounts The concept demonstrated is:

Revenue should not be recognized until:

1 A The earnings process is complete and collection is reasonably assured.

2 B Contracts have been signed and payment has been received.

3 C Work has been performed and customer has been billed.

4 D Collection has been made and warrantees have expired.

The primary objective of financial accounting information is to provide useful information to:

1 A Management.

2 B Capital providers.

3 C Regulators.

4 D None of the above.

Surefeet Corporation changed its inventory valuation method Which

characteristic is jeopardized by this change?

1 A Comparability.

2 B Representational faithfulness.

3 C Consistency.

4 D Feedback value.

Fundamental qualitative characteristics of accounting information are:

1 A Relevance and comparability.

2 B Comparability and consistency.

3 C Faithful representation and relevance.

4 D Neutrality and consistency.

Disclosure notes to a company's financial statements:

1 A Are relatively unimportant facts that don't belong in the basic financial statements.

2 B Document the source of financial statement facts, like literary footnotes.

3 C Are an integral part of a company's financial statements.

4 D Are irrelevant facts that are immaterial in amount.

Constraints on qualitative characteristics of accounting information include:

1 A Verifiability.

2 B Predictive value.

3 C Faithful representation.

4 D Timeliness.

SFAC No.5 focuses on:

1 A Objectives of financial reporting.

2 B Qualitative characteristics of accounting information.

3 C Recognition and measurement concepts in accounting.

4 D Elements of financial statements.

The matching principle is:

1 A A valuation method.

2 B An expense recognition accounting principle.

3 C A cash basis reporting principle.

4 D An asset classification procedure.

The assumption that in the absence of contrary information a business entity will continue indefinitely is the:

1 A Periodicity assumption.

2 B Entity assumption.

3 C Going concern assumption.

4 D Historical cost assumption.

Which of the following best demonstrates the full disclosure principle?

1 A The multi-step income statement.

2 B The auditors' report.

3 C The company's tax return.

4 D Disclosure notes to financial statements.

Primecoat Corporation could disseminate its annual financial statements two days earlier if it shifted substantial human resources from other operations to the annual report project Management decided the value of the earlier report was not worth the added commitment of resources The concept

The enhancing qualitative characteristic of understandability means that information should be understood by:

1 A Those who are experts in the interpretation of financial information.

2 B Those who have a reasonable understanding of business and economic activities.

Enhancing qualitative characteristics of accounting information include:

1 A Relevance and comparability.

2 B Comparability and timeliness.

3 C Understandability and relevance.

4 D Neutrality and consistency.

Maltec Corporation has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors The qualitative concept improved is:

1 A Comparability.

1 A Its conceptual framework.

2 B Its code of ethics.

4 D Gains and losses.

Free Text Questions

Accounting standard setting has been characterized as a political process Discuss this proposition giving an example.